Correlation Between Asia Pacific and Transport

Can any of the company-specific risk be diversified away by investing in both Asia Pacific and Transport at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Asia Pacific and Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Asia Pacific Investment and Transport and Industry, you can compare the effects of market volatilities on Asia Pacific and Transport and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Asia Pacific with a short position of Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Pacific and Transport.

Diversification Opportunities for Asia Pacific and Transport

0.68

Correlation Coefficient

Asia Pacific  Transport

Poor diversification

The 3 months correlation between Asia and Transport is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Asia Pacific Investment and Transport and Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport and Industry and Asia Pacific is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Asia Pacific Investment are associated (or correlated) with Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport and Industry has no effect on the direction of Asia Pacific i.e., Asia Pacific and Transport go up and down completely randomly.

Pair Corralation between Asia Pacific and Transport

Assuming the 90 days trading horizon Asia Pacific Investment is expected to generate 1.2 times more return on investment than Transport. However, Asia Pacific is 1.2 times more volatile than Transport and Industry. It trades about 0.21 of its potential returns per unit of risk. Transport and Industry is currently generating about 0.2 per unit of risk. If you would invest  550,000  in Asia Pacific Investment on May 9, 2025 and sell it today you would earn a total of  410,000  from holding Asia Pacific Investment or generate 74.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Asia Pacific Investment  vs.  Transport and Industry

Asia Pacific Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Pacific Investment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Asia Pacific displayed solid returns over the last few months and may actually be approaching a breakup point.

Transport and Industry

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transport and Industry are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Transport displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asia Pacific and Transport

The main advantage of trading using opposite Asia Pacific and Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asia Pacific position performs unexpectedly, Transport can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Transport will offset losses from the drop in Transport's long position.

The idea behind Asia Pacific Investment and Transport and Industry pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Technical Analysis module to check basic technical indicators and analysis based on most latest market data.